Senate defeats Grassley bid to impose lower payment limits

The Senate turned back an effort by Sen. Charles Grassley, R-Iowa, to impose a $250,000 per individual cap on farm program payments through an amendment to the fiscal 2006-10 budget reconciliation package.

Senators voted 53-46 against a motion by Grassley to waive a point of order raised by Sen. Saxby Chambliss, R-Ga. Chambliss, chairman of the Senate Agriculture Committee, argued that Grassley's amendment was not germane to the budget reconciliation package.

Grassley actually fell 14 votes short of the three-fifths majority or 60 votes he would have needed to waive a provision of the Budget Act of 2003 cited by Chambliss. The vote came as the Senate debated a list of nearly 40 amendments to its version of the five-year reconciliation bill.

In a debate on the amendment on the day prior to the Nov. 3 vote, Grassley noted once again that a relatively small percentage of the nation's biggest farmers receive the majority of farm program payments.

“How long are city taxpayers going to support a farm program for family farmers when 10 percent of the biggest farmers are getting 72 percent of the benefits?” Grassley asked. He claimed that by tightening up loopholes, his amendment would produce $1.1 billion in savings over five years.”

The latest amendment would have reduced the amount farmers could receive annually from $360,000 per individual to $250,000 for a single farmer or for a husband and wife. Previous amendments would have eliminated the three-entity rule and applied payment limits to the use of generic commodity certificates.

Chambliss said he had no doubt that Grassley's figures were correct — as far they went. “The fact of the matter is, 10 percent of the farmers in this country produce more than 72 percent of the products that come off the farm,” he said. “It is not surprising that the folks who produce crops are the farmers who are getting the payments.

“That is what farm policy — good farm policy — is all about. Poor farm policy will provide payments to those folks who are not producing. But we have a good farm policy in place today.”

His goal in drafting the agricultural provisions of the budget reconciliation package was to trim spending of agriculture programs rather than make sweeping policy changes, Chambliss said.

“Senator Grassley's amendment makes significant policy changes,” Chambliss noted. “This debate should occur during reauthorization of the next farm bill. It is a complex issue that deserves thorough discussion when all of our farm policies are reviewed in 2007, not on the Senate floor during budget reconciliation.

Both senators alluded to the National Commission on the Application of Payment Limits created in the 2002 farm bill after the House refused to adopt a provision with stricter payment limits offered by Sens. Grassley and Byron Dorgan, D-N.D.

Grassley said the study concluded that payment limitations affect the largest producers and these producers generally have lower per-unit production costs than other producers. “But the study also says smaller, less efficient producers may be able to expand production and become more efficient under further payment limitations.”

The commission also recommended that no changes be made in the payment limit provisions of the 2002 farm bill until Congress began writing the 2007 bill, Chambliss noted.

“The first recommendation that the commission stated was the 2002 farm bill establishes farm payment programs including payment limits through the 2007 crop year. While farm bills can be changed, their multiyear nature provides stability for production agriculture,” he said. “Producers, their lenders and other agribusiness firms make long-term investment decisions based on this multiyear legislation.

“Consequently, if substantial changes are to be made in payment limits, payment eligibility criteria, or regulations administering payment limits, such changes should be part of the reauthorization in the next farm bill.”

If Grassley's amendment passed, Chambliss said, one of the first ramifications would be that USDA would reduce direct payments to farmers from their current level of $40,000 down to $20,000. “So whether you are an Iowa corn farmer or you are a Georgia peanut farmer or a California cotton farmer, your direct payments are going to be cut in half in the middle of the stream, even though you have made commitments out there which you are going to have to honor.”

He also took a shot at Grassley's home state of Iowa, which often leads the nation in the total amount of farm program payments received.

“Last year, there were $12.5 billion in farm payments made. Guess where 10 percent or $1.3 billion of those farm payments went,” he asked. “It went to farmers in Iowa because they had a tough year last year. Because of the high yields of corn, the price dropped significantly, and under the counter-cyclical programs, Iowa farmers got 10 percent of all payments.

“Under Sen. Grassley's rationale, this is unfair because 10 percent of the farmers get 72 percent of the payments — 10 percent of the payments went to one state. Do I think that is unfair? Absolutely not. Because that is the way the farm bill was designed.

Sen. Thad Cochran, R-Miss., asked fellow senators not to add to the burden of farmers in his state by passing Grassley's amendment.

“Farmers in my state are suffering from the consequences of hurricanes Katrina and Rita,” he said. “Add to that the record-high energy prices, and you have a recipe for total disaster. This amendment would be a fatal blow to an already beleaguered sector of our state's economy. This is not the time to make such a significant change in agriculture policy.”

Passing the Iowa senator's amendment in the middle of a five-year farm bill would create a “gaping hole” in the current safety net currently relied on by Southern farmers, said Sen. Blanche Lincoln, D-Ark.

“There's no question that we all have a stake and an interest in helping bring down our nation's historic deficit, but it is unfair and disingenuous for the government to change the rules our farmers depend on in the middle of the game,” she said. “To do so would be nothing more than a breach of contract, and it would do little to address our budget deficits.”

Lincoln did not vote for the reconciliation package when the Senate Agriculture Committee passed it by an 11-9 vote, saying it also made too great a cut in farm assistance programs.

Chambliss said the 2002 farm bill was a contract that the government entered into with farmers all across America. “Based upon the contract this body agreed to with farmers across America, those farmers went to their bankers, to their equipment manufacturers or retailers, to any number of other individuals who own land, they entered into rent agreements, they entered into loan agreements and long-term purchase agreements for farm equipment.”